Nature Loss and Climate Change: The Twin-Crises Multiplier

Stefano Giglio, Theresa Kuchler, Ströbel, Johannes and Olivier Wang

No 19935, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the economic effects of the interaction of nature loss and climate change in a model that incorporates important aspects of both processes. We capture the distinct ways in which they affect economic activity—with nature constituting a key factor of production and climate change destroying parts of output—but also the ways in which they interact: climate change causes nature loss, and nature provides both a carbon sink and adaptation tools to reduce climate damages. Our analysis of these feedback loops reveals a novel amplification channel—the Twin-Crises Multiplier—that systematically affects optimal climate and nature conservation policies.

Date: 2025-02
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